Citibank: Downgraded Hysan Development (00014) rating to “sell” and cut target price to HK$15.69

The Zhitong Finance App learned that Citibank released a research report that favorable retail factors have been broadly reflected. Hysan Development (00014) faced office challenges, uncertain Lee Garden Phase VIII factors, and limited balance sheet flexibility, so the rating was downgraded from “buy” to “sell” and the target net asset value (NAV) discount was extended from 45% to 65%. The target price dropped sharply from HK$24.3 to HK$15.69, corresponding to a target yield of 7%.

Hysan's retail revenue and core rent in the first half of the year were 15% and 22% higher, respectively, than in the first half of 2023. However, the bank believes that the upward space driven by asset enhancement projects has been reflected through flagship expansion and tenant upgrades from 2024 to 2025. The gap between the 17% increase in tenant sales and the 1% increase in retail rent in the first half of the year also reflects that the upward margin for profit is weakening. The bank said that Hysan's capital cycle plan is progressing smoothly, but with a debt ratio of 49%, further deleveraging may be needed to maintain a stable dividend per share.